U.S. auto market faces prolonged price pressure as vehicle supply stays tight

Traders Union
All News
Financial News
U.S. auto market price pressure

Highlights

About 8 million fewer vehicles were produced for U.S. buyers since the pandemic, driving persistent supply constraints expected to last three to four more years.
U.S. vehicle sales reached 16.2 million units in 2025, with 2026 forecasts (15.8–16.3 million) still well below the 2016 record of 17.55 million units.
Leases dropped from 30% to 18% of new vehicle sales by 2022, and average new car buyers now have household incomes over $150,000, exacerbating affordability issues and boosting demand for 9–10-year-old used cars.

Supply constraints reshape vehicle market

As reported by CNBC, the pandemic’s hit to vehicle production continues to limit the number of cars available to U.S. buyers, with effects now spreading across the full age range of the used market. Jeremy Robb, chief economist at Cox Automotive, says about 8 million vehicles that would have been produced for U.S. buyers during those years were never made because of factory shutdowns and supply shortages.

Automakers that faced limited production shifted toward higher-margin vehicles such as trucks, SUVs and more expensive trim levels, and that strategy largely remains in place. Robb says supply is not expected to improve much over the next three to four years, pointing to a tighter market that may persist beyond the immediate aftermath of the pandemic.

U.S. vehicle sales reached about 16.2 million units in 2025, up from 13.8 million in 2022, according to the U.S. Bureau of Economic Analysis. Cox Automotive forecasts about 15.8 million vehicle sales in 2026, while JD Power expects 16.3 million, both below the record 17.55 million sold in 2016.

JD Power senior vice president Tyson Jominy says the industry has sold roughly 16 million fewer vehicles than it would have if annual sales had held at the 2016 peak. With fewer new vehicles entering circulation, the pipeline into the used market also narrows over time.

Affordability strain lifts older used-car demand

Reduced leasing activity is adding to the shortage in used vehicles. Before the pandemic, leases accounted for roughly 30% of the new vehicle market, according to Robb, but that share fell to 18% in 2022, cutting off an important source of off-lease inventory that typically returns to the used market after about three years.

Automakers and dealers have also pulled back on incentives. Cox Automotive says incentives averaged about 9.5% of new vehicle prices before the pandemic, fell sharply during the supply crunch and are now averaging about 6.5% to 7% in 2026, still below pre-pandemic levels.

That combination of tight supply and reduced discounting is keeping used car prices elevated as consumers also face high gas prices, inflation and broader household cost pressures. Jominy says average new vehicle buyers now come from households earning more than $150,000 a year, compared with about $80,000 for the U.S. economy overall.

Data from Cox Automotive shows demand for 9- and 10-year-old used vehicles is running above historical norms, signaling that more buyers are trading down into older and cheaper cars. Robb says this kind of pricing pressure at the lower end of the market is unusual, underscoring how deeply supply shortages are affecting affordability across the sector.

Our earlier coverage of the May U.S. CPI forecast explained that headline inflation was expected to re-accelerate, largely due to a jump in gasoline prices that adds to household cost pressures. We also noted that markets were watching whether higher energy costs would spill over into broader prices and shape Federal Reserve policy expectations.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.